Definition:
The term graded premium insurance refers to the insurance in which initial premiums are less and later premiums are higher. That is, amount of premiums gradually increases until it comes to level.

Graded premium life insurance policy is one of the less known life insurance policies. It is similar to a whole life type policy that begins with a lower than usual premium that gradually increases year by year for a specific number of years as agreed at the time of entering the insurance policy until it levels off. If a person wants to buy permanent life insurance policy and is unable to pay the full premium initially, the graded premium life policy is surely a suitable alternative for those persons

• The policy has a level death benefit for as long as it remains in force. This can be distributed in a lump sum or in the form of an income.
• Initially the premiums are lower and gradually increase. The premium increases in later years usually after 8 to 10 years.
• After the gradual increase in premiums, they level off and remain constant throughout the insurance period.
• If at any span of time, you need cash, you can borrow cash as the policy is cash value. You can borrow about 80% of cash without affecting the insurance policy.

• The initial premiums are quite lower but when it levels off in next 5 or 10 years, the premium for this policy is usually higher than initial premiums.
• Cash values increase very slowly initially and gets higher in later years that are hard to pay if your income is not sufficient.